Family Security Law Group, APC write about estate planning, wills, trusts, durable power of attorney, title and property agreements, special trusts, probate, trust administration and more!

09/29/2017

Healthcare Costs on the Rise for Retirees

“Fidelity Investments reported Thursday that a 65-year-old couple retiring this year can expect an estimated $275,000 in health care and medical expenses throughout retirement.”

Fidelity looks at retirees’ health care costs every year. They found that it represented a 6% increase over last year’s estimate—and an enormous 70% increase since they did their initial retiree health care cost estimate in 2002.

The article, “Retiring This Year? Here’s What You’ll Pay for Health Care,” appearing in Think Advisor, says that the $15,000 increase over the 2016 estimate is caused by general market trends and expectations for health care costs across monthly expenses associated with Medicare premiums, Medicare copayments and deductibles and prescription drug out-of-pocket expenses. They also assume Medicare health coverage, but don’t include the added expenses of nursing home or long-term care.

The article also explains why reverse mortgages shouldn’t be used to bridge the income gap, when you wait to collect your Social Security benefits. With ongoing uncertainty in health care, you need to understand what you can take to prepare for health care needs in retirement. With these expenses expected to increase in the future, it’s important to add them as a significant part of your retirement plan.

Fidelity’s calculations are based on a hypothetical 65-year-old couple retiring in 2017 with life expectancies from the Society of Actuaries’ RP-2014 Healthy Annuitant rates with Mortality Improvements Scale MP-2016. The estimate was net of taxes. It considered folks who didn’t have employer-provided retiree health care coverage but qualified for Original Medicare. This included cost-sharing provisions associated with Medicare Parts A and B, Medicare Part D premiums, along with out-of-pocket costs, and some services excluded by Original Medicare. It didn’t include other health-related expenses like over-the-counter medications, dental services, and long-term care.

More companies are offering health savings accounts as part of their benefits packages. HSAs are paired with high-deductible health plans which often have lower monthly premiums than traditional health plans. They also include tax benefits of tax-free contributions and balances and savings that can be withdrawn for medical costs without federal tax.

As retiree health care costs continue to go up, it’s increasingly important for employees to focus on saving enough to ensure that these expenses don’t put a kink in their retirement.